Layoffs in the financial industry come with almost every downturn. The latest round of such layoffs, however, is different. In fact, it is eerily quiet as some bosses now hardly say a word after people are fired, according to an article by reporters Louise Story and Eric Dash in the May 16th New York Times.
At Citigroup, Goldman Sachs and Morgan Stanley, the first clue that someone is gone can be the return of an email message from a former colleague’s inactivated corporate e-mail address.
Since last summer, banks worldwide have announced plans to cut 65,000 jobs. Exactly how many employees have been or will be eliminated, however, remains unclear. In the past, Wall Street typically made sharp reductions in their workforce all at once. After the 1987 stock market crash, for example, employees were herded into conference rooms and dismissed as a group. Today, companies are making many small cuts over the course of weeks and even months. Employees who have lost jobs and others vying to hold them say that banks are keeping employees in the dark about the size and timing of layoffs.
Ten years ago when a financial upheaval caused many Wall Street banks to trim payrolls, Citigroup eliminated 10,600 jobs, or about 6 percent of its work force. Last year, Citigroup said it would eliminate 17,000 jobs or about 5 percent of its work force. In January, Citi said it would dismiss 4,200 more people. By April, an additional layoff of 8,700 was announced.
At Goldman Sachs, low performers were dismissed between January and March. A few weeks later, the bank quietly began letting more people go. In total, Goldman will be eliminating about 8 percent of its work force.
At Merrill Lynch, 1,100 people, mostly in its mortgage-related businesses, were laid off earlier this year. In April, the firm announced 2,900 additional cuts.
JPMorgan Chase said last fall that it would lay off 100 people in its fixed-income division and then followed up with several smaller cuts in other parts of the bank. The casualties at JP Morgan will certainly continue to mount as JPMorgan merges with Bear Stearns. As many as 5,500 Bear Stearns employees and 4,000 JPMorgan workers could lose their jobs during the merger.
Layoffs are always difficult, but some of the recent cutbacks have been messy. Before their bosses could tell them, some JPMorgan employees learned from clients that Bear Stearns employees would take their jobs. In March, Lehman Brothers investment bankers found out their jobs were being eliminated when they saw cardboard boxes and dumpster bins in the hallways. When Bank of America dismissed bankers recently, the bank told employees that their annual bonuses had been almost wiped out and that their personal belongings would arrive via mail. Also, the bank announced many of the layoffs on February 13, two days before many employees would be able to start cashing out stock options.
Industry cuts have moved beyond low performers to employees with perceived high potential. Analysts expect for reductions to come later in the year but before employees are scheduled to collect bonuses. Banks and brokerage firms generally pay out about 50 percent of their revenue to employees in salaries and bonuses. Last year that percentage jumped to 70 percent.
Meredith Whitney, a banking analyst at Oppenheimer & Company, estimates that on average, banks announced plans to reduce their work forces by 5 to 8 percent. She predicts that they will probably have to cut at least twice that amount.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. The firm also has an active practice in representing individuals in employment disputes with brokerage firms. The firm is currently involved in representing several brokers in such disputes. For further information, please contact us.